Because the overall $3.5 billion cracker category is one of the few areas of growth in the lackluster food industry, top players Keebler Foods Co., Pepperidge Farm and Nabisco Biscuit Co. view the cheese cracker segment as particularly fertile ground for brand extensions that can build sales.
"The growth in the cheese cracker segment, as across the entire biscuit category, has been driven by good new-product innovation with good marketing behind it," said Dave Nelson, food analyst at Credit Suisse First Boston.
A multitude of new products were introduced this year under Keebler's Cheez-It brand, Pepperidge Farm's Goldfish trademark and Nabisco's Cheese Nips franchise-initiatives backed by unprecedented advertising and promotional spending in the category. Together, those efforts succeeded in driving the savory cracker segment up 10% for the 52 weeks ended Feb. 27, according to Information Resources Inc., compared to more typical food category growth of around 2%.
Campbell Soup Co.'s Pepperidge Farm unit began the fervor for cheese flavor back in the mid '90s. That's when it refocused consumer marketing efforts against its Goldfish line after nearly a decade's hiatus.
With the introduction of the tagline "It's one snack that's OK to get hooked on," developed by thenad agency Saatchi & Saatchi, New York, Pepperidge reinvented the fish-shaped snack cracker as a fun, kid-targeted snack that moms could feel good about because it is baked, not fried.
As a result of the renewed efforts with both advertising and large-scale promotional tie-ins, Pepperidge was able to drive Goldfish sales up a whopping 37.5% to $135 million for the year ended July 6, 1997. Not surprisingly, the competition stood up and took notice.
In mid-1996, Keebler purchased leading cheese cracker marketer Sunshine Biscuit Co., whose Cheez-It sales at the time totaled roughly $137 million, according to Dave Karpick, marketing director for Sunshine Cheez-It. Much like Goldfish, the brand had been under-marketed, actually never advertised nationally during 75 years of business.
"We quickly learned that Cheez-It had an extremely loyal core user base, with the highest purchase frequency in the total cracker category, and we knew we had a diamond in the rough that, with appropriately appointed resources, we could really create some news about," Mr. Karpick said.
They were right. Aiming to tap the lifestyle identified among its dual target groups (kids 5 to 15 and adults), Keebler launched a mountain bike giveaway and "Two-Hand Jam," a basketball-theme promotion supported with TV advertising from Leo Burnett USA, Chicago.
The spots, which ran in programming leading up to and during the NCAA championships, strayed from Keebler's usual elfin theme to feature a young man throwing pebbles at a window; he seemed to be courting a woman leaning out of it, but actually was aiming at a box of Cheez-It. For kids, Keebler introduced Cheez-It Heads & Tails, animal-shape cracker pieces to be mixed and matched. As a result of the new marketing attention, sales climbed 16% in 1998.
Enter Nabisco. With an eye on its competitors' success in the cheese segment, Nabisco relaunched its Cheese Nips line in March 1999 with new packaging intended to appeal to kids and a raft of marketing support that included a promotion last February around the popular Nickelodeon program "CatDog."
In a sign that the category was really heating up, Pepperidge Farm sued Nabisco over a fish-shaped cracker in the new Cheese Nips CatDog line intended to be launched in conjunction with the promotion. Pepperidge won, causing Nabisco to withdraw the line and relaunch it this past August, sans fish.
With all three players' cheese crackers now a major focus of advertising and promotions, competition has intensified. Keebler has continued its efforts to connect with older audiences through a tie-in with brand loyalty-inspiring Nascar, sponsoring both a driver-Buckshot Jones-and a race on behalf of Cheez-It.
"The dollar commitment behind the brand is up substantially, the backbone of it an ongoing TV and print campaign," Mr. Karpick said. The latest campaign, from Burnett, features cartoon mice that live inside a hole in a cheese shop. Sunshine Cheez-It leads the category with sales up 16.8% to $275 million for the year ended Feb. 27, according to IRI.
Pepperidge Farm has not fared as well, with sales for Goldfish down 0.7% to $227 million for the same period. The marketer has not been able to maintain growth levels, despite advertising now handled by Y&R Advertising, New York, and a series of limited-time promotional introductions. But a spokeswoman maintained Goldfish is actually the fastest-growing cheese cracker based on compound average growth rate, and alleged that a lot of the competition is a flash in the pan.
"While there has been a lot of competitive action [in cheese crackers] against the kid target in particular, sustainability is not there for those competitive efforts, while Goldfish over the years has remained solid," said a Pepperidge Farm spokeswoman. In particular, she cited recent declines for the initially popular Nabisco CatDog brand.
To build its franchise among an adult target and capture new usage occasions for Goldfish, Pepperidge in June will introduce a line of Giant Goldfish, versions of the base brand that are "300% larger" and intended for dipping or topping. (Keebler has a similar Big Cheez-It line.) Giant Goldfish will be supported with advertising that plays off the existing tagline. Y&R handles.
Nabisco also has a few tricks up its sleeve. It has introduced new characters from the popular Nickelodeon show to its CatDog product and supporting it with upcoming new advertising from J. Walter Thompson USA, Chicago. Nabisco is also trying to drive the 14.8% growth of its $110 million Cheese Nips franchise further with the recent launch of Sportz, a line of cheese crackers with shapes inspired by sports for kids 6 to 12.
Advertising for Sportz, from North Castle Partners, Stamford, Conn., features Major League Baseball's Ken Griffey Jr., with the effort garnering a lot of enthusiasm from kids, said a spokeswoman.
Pepperidge Farm followed the initiative with its own sports-theme cheese cracker extension, Team Goldfish, that kicked off earlier this spring with football-shape crackers and will be extended with shapes based on baseball, car racing and other popular sports.
And more is on the way besides Nabisco's new offerings.
"We will continue to innovate and aggressively support category growth," said the Pepperidge Farm spokeswoman. Keebler seconds that, with Mr. Karpick talking to "enriching the new product pipeline" for Cheez-It.